07 Sep
Did you know that global warehouse vacancy rates dropped below 5% in 2023? As the eCommerce industry continues to surge, businesses face significant challenges securing sufficient warehouse and fulfillment space. The pandemic has only accelerated this trend, with online businesses multiplying, while available warehouse space diminishes rapidly. One major factor is the growing demand for fulfillment centers to be located close to business hubs, leading to a surge in warehousing developments worldwide.
The warehousing and storage industry is substantial, employing over 600,000 people and contributing $28 billion annually in the United States alone (Statista, 2023). There are currently over 15,000 warehousing businesses operating in the U.S., and together, they manage inventory worth hundreds of billions of dollars every year.
But with eCommerce growth comes significant pressure on the warehousing sector. The question remains—can the industry meet this demand? This blog delves into the latest statistics and trends surrounding the warehouse shortage and explores the impact of these challenges on businesses everywhere.
General Warehouse and Storage Industry Statistics
Growing Warehouse Sizes
The average warehouse size has more than doubled over the past two decades. In 2000, warehouses typically spanned 65,000 square feet, but by 2023, this figure increased to approximately 202,000 square feet, driven primarily by the rise in eCommerce and the need for larger storage spaces (JLL, 2023).
eCommerce businesses require more inventory on hand to meet customer expectations for fast delivery, forcing warehouses to grow significantly. In fact, the U.S. industrial real estate market saw a record 400 million square feet of new warehouse construction in 2022 (CBRE, 2023). These larger facilities allow for better inventory management and faster order fulfillment, but also highlight the pressing need for even more space.
Expansion of Multi-Building Fulfillment Centers
With the rise in demand, many warehouses now consist of multiple buildings. This trend is increasingly common, particularly for fulfillment centers in densely populated regions where space is scarce. According to a recent report by Prologis, multi-building complexes now make up more than 20% of the warehousing market, as eCommerce giants continue to scale their operations to meet growing consumer demand (Prologis, 2023).
The challenge? These expansions require significant capital investment and long-term planning, but with online shopping here to stay, the need for more warehouse space is a persistent concern.
Skyrocketing Warehouse Rents
Warehouse rent has seen a steady increase over the past decade. Between 2016 and 2022, average warehouse rents in the U.S. rose by 40% (JLL, 2023). The pandemic accelerated this trend, with space shortages driving rates even higher in key markets. For instance, warehouse rents in California surged by 61% from 2020 to 2023 (CBRE, 2023).
This is largely due to the imbalance between supply and demand. As more businesses seek warehouse space to store inventory and fulfill orders, fewer available facilities mean rising rental costs. In particular, urban areas with limited land face severe constraints, making rent hikes inevitable.
For businesses, this means that securing adequate warehouse space is becoming more expensive, especially for those located near major eCommerce hubs.
The Rising Cost of Warehousing
Fulfillment Costs are Increasing
A 2023 survey by Supply Chain Dive revealed that 58% of manufacturers expect their need for warehouse space to increase over the next three years. Warehouses are rapidly filling up, and businesses must plan ahead to secure the space they need to meet future demands.
In the U.S., the vacancy rate for warehouse space dropped to a historic low of 3.6% in 2022, leaving many companies struggling to find adequate storage solutions (Statista, 2023). When vacancy rates are this low, businesses have fewer options and often end up paying premium prices for space that may not even fully meet their needs.
Space Shortages Hamper Supply Chains
The decreasing availability of warehouse space has a domino effect across the entire supply chain. With more businesses outsourcing their storage and fulfillment needs, warehouses are often left operating at maximum capacity, leading to delays and inefficiencies.
For example, in 2023, supply chain experts reported that 37% of warehouses experienced delays in shipping due to space shortages and labor issues (Logistics Management, 2023). This challenge is particularly acute for companies with large inventories or those that require climate-controlled spaces, as these specialized warehouses are in even shorter supply.
Technology and Automation in Warehousing
Investing in Robotics and Automation
As the warehouse shortage continues, many companies are turning to automation to streamline their operations and make the most of the space they have. A 2023 survey by PRG found that 49% of warehouse operators are investing in automation technology to enhance productivity and reduce labor costs (PRG, 2023).
Robotic systems, automated storage and retrieval systems (AS/RS), and AI-driven warehouse management software (WMS) are becoming increasingly popular. These innovations not only help businesses manage their inventory more efficiently but also reduce reliance on human labor, which has become a critical issue given the current labor shortages in the warehousing sector.
Automation Alleviates Labor Shortages
Labor shortages have compounded the challenges of warehouse operations. According to a 2022 report by the Bureau of Labor Statistics, the warehousing and storage industry is facing a labor shortfall of over 30,000 workers nationwide. Automation is seen as a key solution, allowing businesses to maintain operational efficiency despite a reduced workforce.
With the global warehouse automation market expected to grow at a CAGR of 14.6% between 2023 and 2030, companies that embrace technology are likely to fare better during peak demand periods (Grand View Research, 2023). These solutions provide the agility needed to respond to fluctuating demands without having to rapidly scale labor.
The Impact of eCommerce on Warehouse Shortages
Escalating Demand from eCommerce
eCommerce sales continue to grow at a rapid pace, with global sales expected to reach $6.5 trillion by 2023, representing a 15% annual growth rate (eMarketer, 2023). As a result, suppliers are under increasing pressure to fulfill more orders faster. This has created a perfect storm of high demand and limited warehouse space.
Fulfillment centers, particularly in North America and Europe, are straining to keep up. In 2022, 63% of warehouses in the U.S. reported that they were operating at near full capacity, with many struggling to maintain the speed and efficiency expected by online shoppers (CBRE, 2023).
For businesses looking to outsource fulfillment, choosing the right partner is critical. Warehouses must have the infrastructure, technology, and workforce to manage the demands of today’s fast-paced eCommerce environment.
Navigating Warehouse Shortages
With warehouse vacancy rates at historic lows and rent continuing to rise, businesses are left with few options. Many companies are now rethinking their warehouse strategies, including seeking partners in secondary markets, investing in automated systems to maximize space efficiency, and even exploring micro-fulfillment centers in urban areas.
Warehouse shortages are no longer a short-term issue—they represent a fundamental shift in how the supply chain operates. Businesses that plan ahead, invest in technology, and remain agile will be better positioned to navigate these challenges and continue to meet customer expectations.
Warehouse Shortage Statistics Regarding Space
Vacancy Rates Hit Record Lows
The global warehouse vacancy rate currently sits at a historic low of around 3% (Insider Intelligence, 2023). This unprecedented shortage has left businesses scrambling for storage space to meet their fulfillment needs. With less space available, many companies are facing significant challenges in storing supplies and fulfilling orders efficiently. This shortage is particularly concerning for businesses that rely on maintaining a robust supply chain, as failing to secure the necessary warehouse space can result in delayed shipments and operational bottlenecks.
Even Tighter Vacancy Rates in Port Areas
Warehouse vacancy rates in port areas are even more alarming, with availability dropping below 1% (Insider Intelligence, 2023). This is especially critical for companies seeking storage near ports to reduce freight and shipping costs. The shortage of space in these high-demand areas is driving up competition for warehouse availability, creating severe disruptions for businesses that depend on smooth, cost-effective supply chain operations. Without the ability to secure space in these prime locations, companies risk facing delays and increased costs due to inefficiencies in their supply chains.
Rent Increases Accelerate Due to Shortages
Warehouse operators across the globe have reported a dramatic increase in rents over recent years. In 2022 alone, rent prices surged by 8.5% between Q1 and Q4 (Industrial Business Indicator, 2023). The scarcity of available warehouse space has created a situation where businesses are forced to pay premium prices just to secure adequate storage. This trend of rising rent costs is expected to continue, which can create financial strain for companies, particularly those looking to outsource storage and fulfillment services. It’s becoming increasingly important for businesses to carefully evaluate their warehousing needs and budget for these rising costs.
Excess Inventory Forces Companies to Slash Prices
Due to supply chain delays, many businesses have found themselves with excess inventory, unable to move products quickly enough to avoid overstocking. To alleviate the burden of excess goods draining revenue, companies have been forced to lower prices to free up space in their warehouses (Insider Intelligence, 2023). This trend of price reduction to clear out inventory has become a common strategy, but it’s a clear indicator of the ongoing warehousing and fulfillment challenges businesses are facing. Managing inventory levels effectively has never been more crucial in a market squeezed for space.
800 Million Square Feet of Additional Space Needed
Industry experts estimate that an additional 800 million square feet of warehouse space is required to alleviate the current shortage (Insider Intelligence, 2023). This staggering figure highlights the enormity of the warehousing crisis and its impact on businesses across industries. As eCommerce continues to grow, the demand for storage space is only increasing, and without sufficient space to handle the volume of goods, businesses risk facing operational challenges that could harm their growth and profitability.
Rental Rates Expected to Rise by Another 10%
Warehouse rents are projected to grow by 10% in 2023 alone (Freight Waves, 2023). Over the past decade, warehouse rental rates have risen steadily due to a combination of increased demand and decreased availability. This trend shows no signs of slowing down, as the supply-demand imbalance persists. Businesses looking to expand their warehousing capabilities must account for this rise in costs when planning for future growth, making it essential to secure long-term storage contracts or explore alternative storage solutions.
Warehouse Capacity Needs to Grow by 15%
To avoid further supply chain disruptions, experts suggest that the global warehouse capacity needs to expand by at least 15% (Freight Waves, 2023). The current shortage is not only causing delays in order fulfillment but is also exacerbating issues such as inventory restocking and business slowdowns. If warehouses fail to expand their capacity, businesses could face prolonged disruptions, further complicating their ability to meet consumer demand and maintain efficient operations. Investing in larger facilities and innovative space management solutions is key to addressing this growing issue.
Supply Chain Disruptions Expected to Persist
Supply chain disruptions related to warehouse shortages are projected to continue well into 2024 (Freight Waves, 2023). The warehousing industry has been under tremendous pressure over the past few years, with demand outpacing supply at an alarming rate. As more businesses rely on eCommerce and just-in-time delivery models, the strain on available warehouse space has only intensified. Without strategic investments in new facilities and technology-driven solutions, these disruptions will likely persist, forcing companies to re-evaluate their logistics strategies.
Warehouse Shortage Statistics Regarding Labour
Labour Takes Up 50-70% of Warehouse Budgets
Labour is the lifeblood of any warehouse operation, with wages and workforce costs accounting for 50-70% of a warehouse’s total budget (ID Logistics, 2023). For a warehouse to function smoothly, it needs a robust workforce to handle tasks such as organizing inventory and managing fulfillment operations. Given the high labor costs, businesses are increasingly exploring ways to optimize these expenses, and many are turning to outsourcing solutions to keep their budgets in check.
High Turnover Rates in Major Warehouses
Amazon, one of the largest players in the industry, faces a staggering 150% employee turnover rate (Verdict, 2023). Despite offering competitive salaries and benefits, the warehousing sector struggles to retain employees, with more workers leaving than are being hired. This high turnover rate reflects a broader challenge across the sector: employees are leaving jobs in storage facilities at a rapid pace, contributing significantly to the ongoing labor shortage.
Injury Rates and Labor Shortages
One of the reasons for this shortage is the high injury rate in the warehouse industry, where 1 in 20 workers suffers from work-related injuries (U.S. Bureau of Labour Statistics, 2023). The physical demands and risks associated with warehouse jobs deter many potential workers, leaving the sector understaffed. Businesses are finding it harder to fill vacancies, and without a steady workforce, many warehouses are operating below their full potential, further exacerbating the supply chain crisis.
Struggles to Attract and Retain Employees
An overwhelming 41% of warehouse managers admit they are unable to attract or retain employees (Westernacher, 2023). This labor shortage stems from the grueling nature of the job, which requires long hours of physically demanding work in often harsh conditions. As a result, many potential workers are reluctant to enter the warehousing sector, leaving businesses grappling with operational inefficiencies due to a lack of manpower.
The High Cost of Labor in Warehouses
Employing just 100 workers in a warehouse can cost around $3.5 million USD annually (Westernacher, 2023). This substantial cost is why many businesses are opting to outsource their warehousing and fulfillment operations to third-party logistics providers (3PLs). By outsourcing, businesses can cut down on labor expenses and focus on their core competencies without the hefty financial burden of maintaining a large warehouse staff.
Labour Shortage: A Top Problem for 55% of Warehouse Managers
Warehouse labor shortages are now a top concern for 55% of warehouse managers (Logistics Management, 2023). Many warehouses are finding it increasingly difficult to hire workers as the shortage intensifies. This problem is even more pronounced in facilities that have yet to adopt automation and robotics. Without the latest technology to assist with tasks, these warehouses are feeling the strain of the labor crisis more acutely.
The Rise of Temporary Labour
Due to the uncertainty surrounding labor availability, 48% of industrial businesses are now opting for temporary labor (Instawork, 2023). Seasonal fluctuations and unpredictable staffing levels have forced many companies to rely on temp workers to meet demand. This approach helps fill the gap during peak seasons but also highlights the instability that the warehousing sector faces when it comes to maintaining a permanent workforce.
Retaining Employees Over Hiring New Ones
A growing number of businesses—47% to be exact—are shifting their focus toward retaining their existing workforce rather than acquiring new employees (Instawork, 2023). This strategy makes sense in today’s labor-short environment, where finding new hires is increasingly challenging. Businesses recognize that keeping their current staff happy and productive is more cost-effective than constantly seeking new recruits.
Labour Shortages Expected to Persist
By 2024, 73% of warehouse employers anticipate continued struggles in attracting workers, a significant increase compared to the previous year (WTW, 2023). As labor shortages continue to plague the sector, warehouse managers are exploring alternative solutions, including automation and robotics, to mitigate the impact. Investing in technology not only alleviates the strain on human workers but also ensures smoother, faster operations. Warehouses that have embraced automation are better positioned to weather the ongoing labor shortage and meet growing fulfillment demands.
Are You Looking for a Top-Notch Warehouse to Outsource Fulfillment for Your Business?
In today’s competitive eCommerce landscape, finding a reliable fulfillment partner is crucial to maintaining seamless operations. At Meteor Space, we understand the challenges businesses face when it comes to warehousing and labor shortages. That’s why we provide comprehensive fulfillment solutions designed to streamline your operations and reduce costs.
Our state-of-the-art fulfillment center spans 200,000 square feet, offering ample storage space for your inventory, no matter the scale of your business. We manage everything from storage to picking, packing, and shipping, ensuring that your products are delivered to your customers quickly and efficiently.
But that’s not all—Meteor Space uses the latest technology to automate and optimize warehouse operations, helping you overcome the challenges of labor shortages. With our advanced systems in place, we reduce the need for manual labor, cutting costs and boosting efficiency. Plus, we offer customizable packaging options that allow your brand to shine in a crowded marketplace.
Whether you’re looking to outsource your fulfillment or simply need more space to store your inventory, Meteor Space is your trusted partner. With our tailored services and cutting-edge solutions, we’ll handle the heavy lifting so you can focus on growing your business.
Ready to learn more?
Contact us today to find out how Meteor Space can help you overcome warehousing challenges and streamline your fulfillment process.
